The Minister and I can agree on one point, that this is essentially a Committee Stage Bill. Having said that, it is probably the sum total of our agreement. Because it is essentially a Committee Stage Bill, I do not propose to-day to go into any detail in relation to the various Parts or sections of the Bill, as such. It is an extremely technical Bill and let me say at once that in endeavouring to explain it, I am glad that the Minister took the step of issuing an explanatory memorandum.
I have not had the opportunity of going back over the records to see whether it was an unusual step or not, as he said, but whether unusual or not, it was a desirable step and one that has facilitated us very much in the consideration of the detailed provisions of the Bill. There are, however, a couple of points which are not referred to and to which I should like to refer before going on to discuss the general economic situation. It was a pity that in this Finance Bill this year the Minister did not take cognisance of one circumstance which is undoubtedly affecting us prejudicially in attracting people to come and reside here. The rates of estate duty in this part of the country and in the Six Counties show a disproportion which is not favourable to us.
I happen to be aware of two cases during the past 12 months where people who would otherwise have returned to settle down here have in fact gone to settle in the Six Counties. The reason which ultimately influenced them in reaching that decision was the disparity in death duty rates. I am not talking at all in terms of large estates. I am talking of the reasonably modest estate running from £10,000 to £20,000. The position is that the rates of estate duty are between one per cent and four per cent. higher here than in the Six Counties. In addition, the Six Counties some years ago abolished legacy and succession duty: therefore, the effective rate charged here is more than four per cent., in such cases, higher than it is up there because legacy and succession duty is chargeable in addition on the net estate, after deducting the estate duty payable, between one, five and ten per cent., according to the relationship of the person concerned.
I do not believe that equalising the position here with the position in the Six Counties would give rise to any vast difference in the Budget revenue. When we are thinking in terms of a Budget revenue of over £100,000,000, the variation that would be involved in this matter would be a very trifling one. It might well be that we are in fact losing more than we gain by maintaining the existing disparity. I want to make it clear, as I say, that it is to the more modest ranges that I am referring, the ranges which are likely to affect the person who has perhaps been abroad during his working lifetime and then has the intention of coming back to retire and to live here.
I think the Minister would be well advised to give detailed consideration to the rates in question because in fact the rate is not merely—in the classes of estates to which I have referred—four per cent. higher here but the four per cent. is actually half as much again as the rate in the Six Counties. In relation to these medium-size estates, the rate there is eight per cent.; here the rate is 12 per cent. Obviously, that must have a considerable bearing on the choice that people may exercise in determining where they will end their days.
I want also to refer to an anomaly that arises in relation to the matter of residence for income tax purposes. The general position is that a person who spends six months here in any one fiscal year is considered resident. If he forms a habit of coming here and spending an average of six months in Ireland, he is considered resident in a year in which he spends three months. But there is one exception to this, one to which I want to draw attention this afternoon.
If a person maintains a residence here available for his occupation, he is considered resident in Ireland, even if he spends only one night in that residence. In fact, I am not quite clear, and I should like the Minister to clarify as to whether he is not resident here even if he spends a day in the country without going into his own premises. The type of person I have in mind is the person who gives very considerable employment in my constituency, the stud farm owner. He gives good employment there, employment that provides wages higher than the average and employment which not merely contributes to the benefit of the people in the area concerned, but contributes also to our national production in a particularly beneficial way and to our balance of payments, to which I want to refer at a later stage.
Very often, indeed, those people have to transmit to this country for the purpose of maintaining their stud farms considerable remittances of income. If a person is not domiciled here but has a residence here, then, as I understand the tax position, he is liable for taxation on those remittances. The effect of that is that if additional remittances are necessary and desirable for the purpose of ploughing back into the stud farm and making it better, and if there is a house on the stud farm where he can come to stay, if he so wishes, he will be liable for taxation on those remittances.
That seems to me to be a narrow conception of the position. If I am correct in my interpretation of the law —and I am supported in that interpretation by some accountants who have great experience in the matter— it seems to me that the present law tends to prevent money coming into the country rather than to encourage it. I think we would all agree that that is an undesirable position which should be rectified. It may be that the situation is covered to some extent by the double taxation agreement with Britain and that it may require some consideration in the light of that agreement. But in any event, it is something I commend to the Minister for examination and for some type of action which will encourage people to come and stay here rather than that they should be discouraged, as they are at present, and to ensure that they will not be discouraged from improving stud farms, for example, with the additional employment that such improvement would give.
I want also to refer again to the class of person to whom I referred a second ago in relation to death duties, that is to say, people who have been brought up here but who have earned their livelihood and spent their working lives abroad. I understand that the position in relation to those people has been eased somewhat by Section 11 of the British Finance Act, 1956. I suggest that similar relief should be given here. It would, I think, be advantageous to the country as a whole that Irishmen and Irishwomen, people of Irish nationality who are forced by circumstances to go abroad to earn their living, should be encouraged to retain property here to which they might retire when their working days are over.
There would be many people abroad who would come within this category, people who are in receipt of salaries from oil companies, for example, who are working abroad and who would like to end their days at home in their own native land. At present, however, if those people wish to retain a residence here during the interval, they are in a penalised situation compared with those who enjoy the relief extended by the British Finance Act to which I refer. Of course, they are obviously influenced, too, by the Channel Islands and Isle of Man position. While we may not be able to compete with the Channel Islands and the Isle of Man in the inducements that could be offered, at the same time I think there are certain penalising conditions which could be removed.
I know, of course, that in relation to this the Revenue Commissioners have certain discretion to make allowances. The difficulty about those discretionary allowances is that it is impossible, as I understand the position, to get authoritative statements on the basis upon which taxation will be levelled in the future. It seems to me essential that a person who wishes to purchase a residence here, to which to retire or to occupy from time to time when on holidays, should know specificially where he will stand. There must be some method by which he can—on disclosing, of course, to the Revenue Commissioners the full and true facts—know exactly where he will stand and on what basis he will be assessed. As I say, in the British Act this refers particularly to people who work full time in a trade, profession, vocation, office or employment outside the United Kingdom, and similar provisions could usefully be introduced here.
A case has recently been brought to my attention of a situation which arises in respect of anyone resident here and who is also an underwriter at Lloyds. He is of course taxable, and properly taxable, in Ireland in relation to his profits. There is, however, an arrangement in Lloyds by virtue of which they form a special reserve fund to which contributions are made out of the profits from time to time. The position under the Income Tax Act, 1952, as I understand it, is that the contribution to the special reserve fund is deemed for all purposes of the Income Tax Acts to be a payment chargeable to income tax by way of deduction. The single resident in Ireland is, of course, not chargeable to income tax on his underwriting profits, but, apparently, the double taxation agreement, while it exempts single charges, does not exempt contributions to the special reserve fund.
Paragraph 4, Part III, of the Eighteenth Schedule of the Income Tax Act, 1952, makes it clear that the claimant "shall not be entitled to the exemption of any income, the tax on which he is entitled to charge against any other person, or to deduct, retain or satisfy out of any payment which he is liable to make to any other person."
Therefore, the contribution to the special reserve fund comes within that proviso. The purpose of the special reserve fund is to level out the surtax liability, but, as phrased at the moment, the double taxation agreement does not seem to cover up the point. By adhering to the special reserve fund scheme, a person who is resident here has rendered himself liable to United Kingdom profits tax and he gets no relief under the double taxation agreement. That, I understand, has operated in one case to prevent certain income coming here that would otherwise be transferred here but in the ownership of a person desiring to come to live here with consequent loss to ourselves. In that case, the person concerned decided not to come here.
I should also like to ask the Minister to confirm for the benefit of certain people who are not quite clear on the provisions of the Bill that the deduction of allowances for surtax purposes made in this Bill does not cover earned income allowances. As far as I can see, the position is that earned income allowances are not deductible for surtax assessment. I make no comment either way on it. I merely want the position clarified as to whether the view which has been taken of this Bill, as framed, is correct or incorrect. So much for the technical aspects of this Bill. We shall have an opportunity of coming back to them on Committee Stage.
Before I go on to other matters which may, perhaps, cause slightly more heat, I should like to say at this stage to the Minister it would be desirable before the Committee Stage of the Bill that a substantial time be allowed to elapse. Whether we are sitting or not in the week of polling, I think it would be desirable that the Committee Stage at least of the Bill be deferred to the following week. I believe the Minister has no objection to that course.
I am sure it is the Minister's experience, as it was mine when I was over there, that, in fact, no Minister in relation to Bills gets any real constructive criticism or constructive contribution in relation to the manner in which a Bill will impact on any particular section of the community until after it has passed the Second Stage and has the publicity of the Second Stage. In fact, the publication of the Bill never seems to take people's interest in the same way as the discussions in the House. In fact, I think it is fair to say that more often than not outside people bring to the notice of the responsible Minister certain unforeseen consequences of a Bill at the very last possible moment, if not even too late. In a Bill that is as technical as this and where the members of this House, with one or two exceptions, are not competent to discuss the detailed application of the measure, it is highly desirable that there should be a considerable period between the Second Stage and the Committee Stage.
More than any other Minister, perhaps, with the exception of the Taoiseach, the Minister for Finance is the Minister of the Government who should indulge in cold and calculating statements of facts, should avoid hysteria and, above all, should avoid distorting the facts and making innuendoes that are not justified by the facts. The Minister was reported in last Sunday's Sunday Press as having gone to speak at a Dublin South-Central election meeting. I am afraid the Minister, when going to speak there, forgot that he was Minister for Finance and went to speak there as Deputy Dr. Ryan.
For sheer brazen impudence some of the lines the Minister took on that day, assuming, of course, that he is correctly reported in Pravda, the Sunday Press, beat anything we have seen for some considerable time. First of all, let me refer to his comments on the balance of payments. The Minister endeavoured to give the impression that the position in relation to the balance of payments at the present time was one that was highly satisfactory and highly satisfactory as a result of the action of Fianna Fáil.
What is the truth? The truth is that the Minister came in here in May, 1957, and delivered a Budget speech in which he was forced to admit that at the time he took over in the financial year 1956-57, we had achieved a balance on our international account; that the measures taken by me and by the Government of which I had the honour to be a member had achieved their purpose in relation to that international account; and that the position in the financial year 1956-57 had so altered on our international balances that at the time he took over the reins of office we were in balance on that account.
I do not propose today to go back over all the misrepresentations and attacks that were made upon us, and upon me in particular, by Deputy Dr. Ryan, as he then was, and his Fianna Fáil colleagues. To go back on all the innuendoes, on specific promises made by Fianna Fáil canvassers that the Fianna Fáil Government would at once remit the levies which I had imposed for balance of payment purposes would be futile. Two years have come and gone and the balance of international payments was in order in the financial year in which the Minister took over as he himself admitted, but far from their being any remission of those levies, part of this very Finance Bill we are now discussing is for the purpose of making those levies permanent, building them into the permanent tax code of the State and ensuring that they will be collected for ordinary current Budgetary purposes.
If anybody said in March, 1957, that that would be the purpose and policy of the Fianna Fáil Party and of the Fianna Fáil Minister for Finance, whoever he might be, clearly we would have been told by Deputies opposite that we were indulging in fanciful lying, but the facts speak for themselves. The unfortunate thing, however, is that not merely have the public been mulcted in that way, not merely will the public continue to have these moneys extracted from their pockets on a permanent basis— whereas with us it was made quite clear that it was only a temporary management for balance of payments purposes—but we are now running into a situation in which Fianna Fáil have allowed the balance of payments already to start getting into a position which is far from satisfactory.
For the four months ending last April, the first four months of the year, our import excess was £33½ million. That is approximately £9½ million more than the import excess for the same period of last year. If one were to multiply the import excess merely by three, we would find that on our trading account that would mean we would have an import excess this year of approximately £100,000,000. But of course it would not be fair to do that because the fall of the year is always somewhat better than this time of the year but it is fair to compare like with like. In the first four months of this year we have an increased import excess of £9½ millions.
It is also fair to remind the Minister of the fact that in his Budget estimates for the current year the one place where he is budgeting for any substantial increase in revenue at existing rates of taxation is in respect of customs duties. Increased customs duties, even allowing for the switch from import levies to customs, can only be based on increased imports or increased use of tobacco. I do not think that the Minister, particularly in view of statements made recently by his colleague, the Minister for Health, will say that he can fairly or adequately estimate increased customs revenue on the basis of increased tobacco consumption.
In passing I might say—and I think this is another point on which the Minister will agree with me—that it is a most unhealthy situation for national finances to be based on a system in respect of which the taxation from one single commodity, tobacco, is approximately 25 per cent. of our whole national revenue. It is a basis which leaves us more than vulnerable to change in the habits of the people and one which could, in certain circumstances, have most dreadful results on the outturn of a Budget in any year. Be that as it may, it is quite clear that we are running at present at the rate of £100,000,000 a year trading deficit. We shall not reach that, I hope, and I do not think we shall. Our invisible income last year was in the region of £64½ million and if we can keep to the same rate of import excess as at present we would end the year, probably, with a deficit on our international trading account of about £36,000,000.
I do not think things will be quite as bad as that but on the existing figures nobody could suggest, unless there is a tremendous improvement that none of us can foresee, a balance of payments deficit this year of an order any less than of about £30,000,000. In those circumstances, for any person holding the office of Minister for Finance to go out to Dublin South Central to an election meeting and start jeering at the previous Government for having a deficit in 1956 of £14½ million which they corrected before he took office, so as to get the balance of payments into equilibrium, is brazen dishonesty.
I hope circumstances will change. The terms of trade are about as favourable as we can hope to expect; we cannot genuinely foresee any further improvement in those terms, so far as the published figures are available. We are facing a position in which it would be difficult to make any estimate at present in relation to our balance of payments account for 1959 other than that we shall have a deficit somewhere between £25,000,000 and £30,000,000. That is not much of a record for Fianna Fáil considering they themselves had to admit that, at the time they took over the reins of Government from us, our balance of payments account was in equilibrium.
But there is worse than that. By the manner in which he has turned temporary levies into permanent taxation the Minister has deliberately thrown away a weapon already forged and easy to use if, unfortunately, we should get into difficulties of that sort again. The method that was adopted then is no longer available to him because he has taken what was purely a temporary balance of payments remedy and turned it into a permanent imposition on the people. I hope, therefore, from that point of view, that there will be some unforeseen change in the situation. Certainly, everybody on this side of the House would welcome anything that we could see coming round the corner in any shape or form that would avert any difficulties on that score.
We have only the April figures. I am certain the Minister has not the May figures yet. But the first four months of this year show a trend which, if it is continued, will present a problem to whoever is sitting over there as Minister for Finance. I have no doubt whatever that if the rôles were reversed, if we were in Government and the Minister for Finance were over here, he would be stumping the country during this election campaign saying we had been lacking in the performance of our duty in not already having taken remedial measures because of the upsurge in the import excess. I do not take that view but I do say that the position is one of which serious note will have to be taken, and it has come simply and solely because of the manner in which the Minister and his Government have mismanaged the situation in those two years.
When I was speaking on the Budget of 1957 I recollect—I have not looked it up—telling the House, much to the jeers of the Minister and Fianna Fáil, that we had handed over the finances of this country, on the Minister's own admission at that time, in balance of our international account, that I hoped they would keep it in balance but that I doubted if they had the ability to do so. Two years afterwards we can say that that was correct and that, in fact, they have thrown away the advantages then obtained, advantages which were dearly bought, and undoubtedly bought at the expense of political popularity, because we felt it essential in the national interest to protect the means by which the country would have in the years ahead the reserves and the wherewithal to buy the raw materials of industry without which industry would collapse and employment would virtually cease. We did that and in doing so we were attacked ferociously by the Minister and by other Fianna Fáil speakers. We left them a situation which was in balance. They have allowed it now to get out of balance and the responsibility must rest fairly and squarely on their shoulders.
When the Minister was speaking the other day he went on to talk of unemployment. I must confess it is the first time I have ever heard a Minister in this State say that ten years ago there was too much employment in agriculture. I wonder, if the Fianna Fáil voters throughout the country had known in 1957 that that was going to be part of the policy of Fianna Fáil, would they have given Fianna Fáil their support at that time, when a Minister would solemnly express it as his opinion that there had been over employment ten years ago in agriculture?
It is well for us to know what exactly is the outlook of the Fianna Fáil Party and the Fianna Fáil Government in relation to employment in agriculture. The economic statistics published show that it is not only in relation to agriculture that the employment record of this Government is far from satisfactory. This morning we all received the result of the quarterly statistical inquiry from the Central Statistics Office. The quarterly volume index of manufacturing industries for the first quarter of 1959 is at 102.2—agreed at once that that is substantially higher than it was in March, 1957. It was lower then because of the steps that had to be taken. When we had turned the tide, with proper and efficient management in Government, we should in the period of two years have got back at least to the position of March, 1956.
Again if anybody was told during the general election of 1957 that the volume of manufacturing industries after two years of Fianna Fáil Government would still be three per cent. under what it was in March, 1956, and that the number of people employed in manufacturing industries in March, 1959, would be approximately 3,000 fewer than in March, 1956, would the present Government receive the votes they did receive from the people?
The Minister and myself had some discussion in relation to the date on which the employment statistics were taken. I am not quite clear yet whether the time I mentioned, March, 1954, or the 1st June, 1954, is the correct one. In any event, as I told the Minister on that occasion, I concede the 1954 figure to him because whether it was March or the 1st June it was before the change of Government came. However, we have a situation now, as outlined in Economic Statistics, that in construction we are down a long, long way in relation to the number of people employed compared to the time when the Minister took up the reins of office—12,000 fewer people employed. Yet the Minister for Finance proceeded to speak the other day about the building industry. This is a quotation from his speech as reported in last Sunday's Sunday Press.
The Department of Local Government continued to sanction building and sanitary schemes but instead of providing capital for them left them to hawk their propositions....
The same is true in relation to the amount of finance being provided by this Government and by the last Government in relation to housing and other services. I would refer the Minister to the reply he gave to me on the 12th February, 1958. The State capital programme on housing in 1954/55, for which we were responsible, was £10.49 million. In 1955/56 it was over £10 million again. In 1956/57, the year to which the Minister apparently was referring, the expenditure in the State capital programme of housing was £10.72 million That was the expenditure in the year at which the Minister jeered in his speech last Saturday night.
What is the position this year? What was the position last year when nobody except the Minister was responsible? I refer to Table V of the tables issued with the financial programme. Instead of a housing expenditure of over £10 million, the expenditure last year was £6.48 million. How on earth, therefore, can anybody with any viewpoint of honesty, in the position of a responsible Minister for Finance, go out and make the speech, for election purposes, to delude the people, that the Minister made last week referring to housing and construction, when he knows or should know and certainly has the means of knowing and has the means to his hand to find out that, in fact, last year, he provided £4,000,000 less for housing than was provided in the year of our time in respect of which he was uttering criticism?
No responsible, honourable Minister for Finance could make that mistake and I cannot help feeling that it was done deliberately for political purposes without bothering as to what was the truth and without bothering as to the effects it might have on our economic fabric and on the country as a whole.
Even this year, the Minister is estimating on the basis of £8.27 million as against the £10 million odd to which I have referred. Let him take his whole public capital programme that is set out in Table 5 of the Tables issued with the Budget Statement and he will find that in respect of all those items, one after the other, the amount last year was considerably different from the amount to which he has referred in criticism in his speech.
Perhaps we did try to do too much, too soon, too quickly. If that was the criticism, then I could understand it. But it seems to me dishonest and dishonourable to criticise us for making available too little money to local authorities when the facts are that the amount that was made available for housing purposes—and it was housing to which he was referring—in our last year of office was over £10 million and the amount he is making available this year is somewhere in the region of £6½ million.
As I say, I could understand the criticism, if it were that we were trying to do too much too quickly. There might be some validity in that, but there can be no excuse, except that it was an effort to get cheap, petty, political propaganda, for the jibes in which the Minister indulged when he went out last Saturday and made the speech to which I have referred.
I would not subscribe, and nobody from this side of the House would subscribe, to the view that we have not at the present time serious, difficult, economic problems to face. As I have already said, we have a rising deficit in our balance of payments. There has been a drop in employment of 32,000 in the past two years, on the figures published by the Minister. Deputy Faulkner need not look surprised. I would refer him to Table 12 of the Economic Statistics issued by the Department of the Taoiseach. There he will find that two years of Fianna Fáil Government have meant that there are 32,000 fewer people employed in Ireland than there were on the day his Party took office.